Abstract

This paper measures and compares the tail risks of limit and market orders using Extreme
Value Theory. The analysis examines realised tail outcomes using the Dealing 2000-2
electronic broking system based on completed transactions rather than the more common
analysis of indicative quotes. In general, limit and market orders exhibit broadly similar
tail behaviour, but limit orders have significantly heavier tails and larger tail quantiles
than market orders.

Item Type:

MPRA Paper

Institution:

University College Dublin

Original Title:

The tail risks of FX return distributions: a comparison of the returns associated with limit orders and market orders